Rent controls are not the answer to the cost of living crisis

Rent controls in the private rented sector will not solve high housing costs

Commenting on the Labour Party’s plans for intervention in the private rented housing sector, Mark Littlewood, Director General at the Institute of Economic Affairs, said:

“Rent controls are the wrong solution to rising housing costs in the UK. Labour have identified the problem of spiralling living costs, but this solution defies economic logic. Historically, such policies have been disastrous for tenants.

“Allowing rents to increase each year by only a benchmark of average market rents will prevent the efficient allocation of housing, creating dangerous distortions the higher the level at which the averages are calculated.

“Removing rent from market rates will create perverse incentives for landlords in areas where market rents rise quickly. Aside from creating unnecessary layers of bureaucracy, this policy may lead to landlords being uncooperative in the hope that tenants leave early. The consequences will be at the disadvantage of exactly the people the policy is intended to help.

“The key factor behind high cost renting is the lack of supply of homes where people want to live. Labour’s proposals to hold down rent increases will do nothing to alleviate this. To deal with high housing costs politicians must urgently liberalise the UK’s draconian planning laws.”

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.

The IEA is a registered educational charity and independent of all political parties.